Certificate of Excellence in - Homeland Security · 2017-11-15 · Certificate of Excellence in...

We are DHS

https://www.dhs.gov/we-are-dhs





Certificate of Excellence in

Accountability Reporting

In May 2017, DHS received its fourth consecutive Certificate of Excellence in Accountability Reporting

(CEAR) from the Association of Government Accountants (AGA) for its FY 2016 Agency Financial Report,

along with a best-in-class award for Best Agency Head Message. The CEAR Program was established by

the AGA, in conjunction with the Chief Financial Officers Council and the Office of Management and

Budget, to further performance and accountability reporting.

About this Report

About this Report

The Department of Homeland Security (DHS) Agency Financial Report for Fiscal Year (FY) 2017 presents the

Department’s detailed financial information relative to our mission and the stewardship of those resources entrusted

to us. It also highlights the Department’s priorities, strengths, and challenges in implementing programs to enhance

the safety and security of our Nation.

For FY 2017, the Department is using the alternative approach—identified in the Office of Management and Budget’s

Circular A-136—to produce its Performance and Accountability Reports, which consists of the following three reports:

DHS Agency Financial Report | Publication date: November 15, 2017.

DHS Annual Performance Report | Publication date: The DHS Annual Performance Report is submitted with

the Department’s Congressional Budget Justification.

DHS Report to our Citizens (Summary of Performance and Financial Information) | Publication date:

February 15, 2018.

When published, all three reports will be located on our website at: http://www.dhs.gov/performance-accountability.

http://www.dhs.gov/performance-accountability

Message from the Secretary

- ii - FY 2017 Agency Financial Report


November 14, 2017

I am pleased to present the Department of Homeland Security’s

(DHS) Agency Financial Report for Fiscal Year (FY) 2017. This

report provides an assessment of the Department’s detailed

financial status and demonstrates how the resources entrusted

to us were used to support our critical mission.

DHS manages risk every day, and in an environment of new and

evolving threats, we cannot do more with less. As a result, we

strive to ensure that the limited resources we have cover our

areas of greatest risk before seeking additional resources to

meet agency requirements.

Even with the extremely high operational tempo of the

Department, DHS continues to be transparent and accountable

to our stakeholders and taxpayers when it comes to how their

tax dollars are spent. The Government Accountability Office

(GAO) recognized the Department in the 2017 High Risk Series

for our significant progress toward addressing GAO’s outcomes

and meeting criteria to be removed from the GAO High Risk list, demonstrating our continued

efforts to transform and integrate our management functions. In 2017, DHS was also

recognized by the U.S. Department of the Treasury for demonstrating our full commitment to

transparency in achieving compliance with the Digital Accountability and Transparency Act.

DHS spending data is available at www.usaspending.gov.

This year, we institutionalized transparent and repeatable processes to guide the Department’s

resource allocation by mission area rather than Component stovepipes. In one of the largest

budget transformations in the Federal Government’s history, the Department instituted a

Common Appropriations Structure framework, which allows the Department to compare like

missions and activities and reduce 76 non-integrated appropriations types to four common

appropriations for all Components but the U.S. Coast Guard. The U.S. Coast Guard is

transitioning to the Common Appropriations Structure by FY 2019.

For FY 2017, DHS received a clean audit opinion on its financial statements for the fifth

consecutive year and continues to strengthen and mature our internal control processes. DHS

is the only federal agency required by law to obtain an opinion on internal controls over

financial reporting. The Department’s maturing internal control program and its

comprehensive enterprise approach to remediation are driving continuous progress, as

evidenced by the ability to reduce material weaknesses. In FY 2017, with dedicated efforts by

all of our Components, but particularly the U.S. Coast Guard, DHS achieved a downgrade of its

property, plant and equipment material weakness to a significant deficiency. With the two

remaining internal control material weaknesses—Financial Reporting, and Information

Technology—DHS is executing a multi-year strategy and plan to achieve an unmodified internal

control audit opinion.

http://www.usaspending.gov/


U.S. Department of Homeland Security - iii -

DHS remains committed to securing the homeland as well as preparing for and responding to

disasters. We will continue to meet these challenges with accountability and transparency —

strengthening our risk management, internal controls, and mission-based resourcing to

maximize the return on taxpayer investment.

Sincerely,

Elaine C. Duke

Acting Secretary of Homeland Security

- iv - FY 2017 Agency Financial Report

Table of Contents

About this Report ............................................................................................................................. i

Message from the Secretary .......................................................................................................... ii

Management’s Discussion and Analysis ........................................................................................ 1

Our Organization ............................................................................................................................. 2

Strategic Alignment Overview ........................................................................................................ 2

Performance Overview ................................................................................................................... 4

Financial Overview ....................................................................................................................... 25

Secretary’s Assurance Statement .............................................................................................. 30

Financial Information .................................................................................................................. 37

Message from the Chief Financial Officer .................................................................................. 38

Introduction .................................................................................................................................. 39

Financial Statements .................................................................................................................. 40

Notes to the Financial Statements ............................................................................................. 48

Required Supplementary Stewardship Information ................................................................ 120

Required Supplementary Information ...................................................................................... 124

Independent Auditors’ Report................................................................................................... 130

Other Information ...................................................................................................................... 163

Tax Burden/Tax Gap .................................................................................................................. 164

Combined Schedule of Spending ............................................................................................. 165

Summary of Financial Statement Audit and Management Assurances ................................ 168

Payment Integrity ....................................................................................................................... 170

Fraud Reduction ........................................................................................................................ 180

Reduce the Footprint ................................................................................................................. 184

Civil Monetary Penalty Adjustment for Inflation ...................................................................... 185

Grants Oversight & New Efficiency (GONE) Act ....................................................................... 192

Other Key Regulatory Requirements ........................................................................................ 193

Acronym List .............................................................................................................................. 207

Management’s Discussion

and Analysis

Management’s Discussion and

Analysis

The Management’s Discussion and Analysis is required supplementary information to the financial statements and provides a

high-level overview of the Department of Homeland Security.

The Overview section describes the Department’s organization, missions and goals, and overview of our Components.

The Performance Overview section provides a summary of each homeland security mission, selected accomplishments, key

performance measures, and future initiatives to strengthen the Department’s efforts in achieving a safer and more secure Nation.

The Financial Overview section provides a summary of DHS’s financial data explaining the major sources and uses of funds and

provides a quick look at our Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, Statement of Budgetary

Resources, and Statement of Custodial Activities.

The Management Assurances section provides the Secretary’s Assurance Statement related to the Federal Managers’ Financial

Integrity Act, the Federal Financial Management Improvement Act, and the Department of Homeland Security Financial

Accountability Act. This section also describes the Department’s efforts to address our financial management systems to ensure

systems comply with applicable accounting principles, standards, requirements, and with internal control standards.

Management’s Discussion and Analysis

- 2 - FY 2017 Agency Financial Report

Our Organization

The Department of Homeland Security (DHS) has a fundamental duty—to secure the Nation

from the many threats we face. This requires the dedication of more than 240,000 employees

in jobs that range from aviation and border security to emergency response, from cybersecurity

analyst to chemical facility inspector. Our duties are wide-ranging and as one team, with one

mission—we are one DHS—keeping America safe.

DHS’s operational Components lead the Department’s frontline activities to protect our Nation

(shaded in blue). The remaining DHS Components (shaded in light green) provide resources,

analysis, equipment, research, policy development, and support to ensure the frontline

organizations have the tools and resources to accomplish the DHS mission. For more

information about the Department’s structure, visit our website at

http://www.dhs.gov/organization. For information on each of our Components, click on their

respective link to the right of the figure below.

Figure 1: DHS Operational and Support Components

Strategic Alignment Overview

The Department operates under one unified mission: With honor and integrity, we will

safeguard the American people, our homeland, and our values. The FY 2014-2018 Strategic

Plan further details the Department’s missions and focus area, which are grouped into four

major missions for better alignment within the Financial Section for the Statement of Net Cost

Operational Components

CBP – U.S. Customs and Border Protection

FEMA – Federal Emergency Management Agency

ICE – U.S. Immigration and Customs Enforcement

TSA – Transportation Security Administration

USCG – U.S. Coast Guard

USCIS – U.S. Citizenship and Immigration Services

USSS – U.S. Secret Service

Support Components

DMO - Departmental Management and Operations

DNDO – Domestic Nuclear Detection Office

FLETC – Federal Law Enforcement Training Centers

I&A – Office of Intelligence and Analysis

NPPD – National Protection and Programs Directorate

OHA – Office of Health Affairs

OIG – Office of Inspector General

OPS - Office of Operations Coordination

S&T – Science and Technology Directorate

http://www.dhs.gov/organization

http://www.dhs.gov/sites/default/files/publications/FY14-18%20Strategic%20Plan.PDF


https://www.cbp.gov/

https://www.fema.gov/

https://www.ice.gov/

https://www.tsa.gov/

https://www.uscg.mil/

https://www.uscis.gov/

https://www.secretservice.gov/

https://www.dhs.gov/directorate-management

https://www.dhs.gov/domestic-nuclear-detection-office

https://www.fletc.gov/

https://www.dhs.gov/office-intelligence-and-analysis

https://www.dhs.gov/national-protection-and-programs-directorate

https://www.dhs.gov/office-health-affairs

https://www.oig.dhs.gov/

https://www.dhs.gov/office-operations-coordination

https://www.dhs.gov/science-and-technology


U.S. Department of Homeland Security - 3 -

and related footnotes to allow the reader to clearly see how resources are spent towards the

common goal of a safe, secure, and resilient Nation.

Figure 2: DHS Strategic Plan Alignment for Reporting

Figure 3: DHS’s Net Cost of Operations for Each Major Mission Area

The chart above provides DHS’s Net Cost of Operations for each major mission area. Further

information about the Department’s financial position and results of operations is presented in

the Financial Overview section. The Performance Overview that follows provides a summary of

performance highlights from a subset of the Department’s strategic measures using the

structure above.

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Mission 1: Prevent Terrorism and Enhance Security

Mission 2: Secure and Manage Our Borders

Mission 4: Safeguard and Secure Cyberspace

Mission 5: Strengthen National Preparedness and Resilience

Mission 3: Enforce and Administer Our Immigration Laws

Focus Area: Mature and Strengthen Homeland Security

With honor and integrity, we will safeguard the American people, our homeland, and our values.



Performance Overview

The Performance Overview provides a summary of key performance measures, selected

accomplishments, and forward looking initiatives to strengthen the Department’s efforts in

achieving a safer and more secure Nation. A complete list of all performance measures and

results will be published in the DHS FY 2017-2019 Annual Performance Report with the

FY 2019 Congressional Budget and can be accessed at: http://www.dhs.gov/performance-

accountability.

The Department created a robust performance framework that drives performance

management and enables the implementation of performance initiatives. This approach also

facilitates the reporting of results within the Department for a comprehensive set of measures

aligned to the missions and goals of the Department. The figure below shows the linkage

between our strategic plan, the Department’s mission programs, and the measures we use to

gauge performance. This approach to measurement ensures that the Department can assess

the achievement of our missions as identified in our strategic framework.

Figure 4: DHS Performance Framework





Foster a Safe and Secure Homeland

Mission 1: Prevent Terrorism and Enhance Security

Preventing a terrorist attack in the United States remains the cornerstone of homeland

security. Our vision is a secure and resilient Nation that effectively prevents terrorism in ways

that preserve our freedom and prosperity.

Our goals for this mission are:

Goal 1.1: Prevent Terrorist Attacks;

Goal 1.2: Prevent and Protect Against the Unauthorized Acquisition or Use of Chemical,

Biological, Radiological, and Nuclear Materials and Capabilities; and

Goal 1.3: Reduce Risk to the Nation’s Critical Infrastructure, Key Leaders, and Events.

The following highlighted measures gauge our efforts to prevent terrorism and enhance

security.

Percent of passenger data submissions that

successfully undergo Secure Flight watch list

matching (TSA): Vetting individual travelers

against high-risk watch lists strengthens the

security of the transportation system. This

measure reports the percent of qualified

message submissions received from the airlines

that are successfully matched by the Secure

Flight automated vetting system against the

existing high-risk watch lists. A qualified

message submission from the airlines contains

passenger data sufficient to allow successful

processing in the Secure Flight automated vetting system. In FY 2017, TSA successfully

matched 100 percent of passenger data submissions.

Percent of performance standards

implemented by the highest risk chemical

facilities and verified by DHS (NPPD): The

Chemical Facility Anti-Terrorism Standards

(CFATS) program is an important part of our

Nation’s counterterrorism efforts as the

Department works with our industry

stakeholders to keep dangerous chemicals out

of the hands of those who wish to do us harm.

The CFATS program identifies and regulates

high-risk chemical facilities to ensure they have

security measures in place to reduce the risks

associated with these chemicals. Initially authorized by Congress in 2007, the program uses a

dynamic multi-tiered risk assessment process and requires facilities identified as high-risk to

meet and maintain performance-based security standards appropriate to the facilities and the

risks they pose. In FY 2017, DHS delivered guidance to the highest risk chemical facilities,

https://www.dhs.gov/chemical-facility-anti-terrorism-standards



prompting these owners and operators to include 21,412 performance standards in their

security plans. Of the 21,412 performance standards, 19,914 have been implemented,

achieving a 93 percent result for this measure, narrowly missing its target. Implementing these

performance standards improves the overall security of the highest risk chemical facilities. In

October 2016, DHS rolled out the Chemical Security Assessment Tool (CSAT) 2.0 system, an

updated online portal that helps DHS identify facilities that meet the criteria for high-risk

chemical facilities. During FY 2017, the implementation of CSAT 2.0 resulted in significant

movement of facilities entering and leaving the program. As a result of these updates, DHS

saw an overall decrease in the percentage of performance standards implemented by the

highest risk chemical facilities, particularly as more facilities were reviewed and re-tiered using

the CSAT 2.0 system. DHS will continue to prioritize the implementation of performance

standards across the highest risk chemical facilities.

Percent of National Special Security Events that

were successfully completed (USSS): National

Special Security Events (NSSE) require a

tremendous amount of preplanning and

coordination with numerous federal, state, and

local jurisdictions. When an event is designated

by the Secretary of DHS as an NSSE, the USSS is

the lead agency for the design and

implementation of the operational security plan.

This measure is a percent of the total number of

NSSEs completed in a fiscal year where once the

event commenced, a security incident inside a

USSS protected venue did not preclude the event's agenda from proceeding to its scheduled

conclusion. USSS has attained 100 percent success for the past five years.

TSA Pre✓® Reaches Milestone with more than 5 Million Travelers Enrolled

The Transportation Security Administration TSA Pre✓® program reached a milestone in July 2017 of more

than 5 million travelers enrolled. TSA Pre✓® now has more than 390 application centers nationwide.

“By growing the trusted traveler population, we help our officers focus on potential threats, which

strengthens the security screening process and ultimately provides better security for all travelers,” said

TSA Acting Administrator Huban A. Gowadia1. “We will continue our efforts to further expand the TSA Pre✓®

program, with the ultimate goal of providing the most effective security in the most efficient way.”

TSA Pre✓®, which is now available at more than 180 U.S. airports, is an expedited screening program that

enables low-risk travelers to enjoy a more convenient and efficient screening experience. Travelers using

the TSA Pre✓® lane do not need to remove shoes, belts, light jackets, laptops, or 3-1-1 liquids from their

carry-on bags.

U.S. citizens and lawful permanent residents may apply for TSA Pre✓® for a cost of $85 for five years. Once

approved, travelers will receive a “known traveler number” and will have the opportunity to utilize TSA

Pre✓® lanes at select security checkpoints when flying on any of the 37 participating airlines. TSA Pre✓® is also available for

U.S. Armed Forces service members, including those serving in the U.S. Coast Guard, Reserves, and National Guard.

1 David Pekoske was confirmed by the U.S. Senate as the Transportation Security Administration’s seventh

administrator in August 2017.

http://www.secretservice.gov/protection/#nsses

http://www.secretservice.gov/protection/#nsses



Looking Forward

The United States has made significant progress in securing the Nation from terrorism.

Nevertheless, the evolving and continuing threat from terrorists remains, as witnessed by

events around the globe. The Department and its many partners, which includes international

and federal, state, local, tribal and territorial governments, public and private sectors, and

communities across the country, have strengthened the homeland security enterprise to better

mitigate and defend against these dynamic threats. Below are a few areas that advance our

efforts to achieve the Department’s mission of preventing terrorism and enhancing security.

TSA Enhancing Security to Mitigate Checkpoint Gaps: TSA continues to advance our ability to

assess potential threats from aviation passengers both in the domestic and international

domains. We will continue to improve the Threat Image Projection data quality to ensure the

security of the traveling public. Ongoing testing and deployment of new technology to identify

threats is underway. Based on the results of these tests, plans will be made to enhance our

ability to identify and mitigate checkpoint gaps. In addition, specific improvements are being

made to enhance airport perimeter and access security and identity vetting.

Chemical Facility Tiering: Tier 1 and 2 facilities are those chemical facilities that pose the

highest risk with respect to vulnerability, consequence, and threat factors. The CFATS program

identifies and regulates high-risk chemical facilities to ensure they have security measures in

place to reduce the risks associated with certain chemicals of interest. The challenge is that

the number and tier of existing chemical facilities changed in FY 2017 based on a revised

methodology enacted at the beginning of FY 2017. These changes in tiering pose a challenge

in that the backlog of facilities needing assessments changed dramatically and will have an

impact to get all assessments up to date. Moving forward, the Department will look into

scheduling and staffing approaches that will prioritize the assessment of all Tier 1 and 2

chemical facilities to achieve an acceptable level of oversight and understanding. DHS

anticipates that the tiering for the highest risk chemical facilities will stabilize in FY 2018 as

facilities continue to self-report chemicals of interest under the new methodology.

USSS Protecting Critical Infrastructure, Key Leaders, and Events: USSS has numerous efforts

underway to meet increasing operational challenges including reducing time to hire, retention

initiatives, and technology development. Challenges have been faced with the increased

demands on the protective mission in terms of both scope and complexity. Thus the USSS is

looking at new and unique methods to address a broad range of areas to include:

modernization and support of mission-critical information technology (IT) systems;

infrastructure for protective and investigative mission operations; improved staffing and career

models to ensure proper work/life balance for agents; new staffing goals and retention

initiatives to reduce attrition; and enhancing training infrastructure to meet future needs.

https://www.dhs.gov/chemical-facility-anti-terrorism-standards



Mission 2: Secure and Manage Our Borders

DHS secures the Nation's air, land, and sea borders to prevent illegal activity while facilitating

lawful travel and trade.


Goal 2.1: Secure U.S. Air, Land, and Sea Borders and Approaches;

Goal 2.2: Safeguard and Expedite Lawful Trade and Travel; and

Goal 2.3: Disrupt and Dismantle Transnational Criminal Organizations and Other Illicit

Actors.

The following highlighted measures gauge our efforts to secure and manage our borders.

Rate of interdiction effectiveness along the

Southwest Border between ports of entry (CBP):

As a division of CBP, the Border Patrol has

evolved significantly since its inception in 1924;

however, its overall mission remains unchanged:

protecting our Nation’s borders from illegal entry

of people, drugs, and contraband. Together with

other law enforcement officers, the Border Patrol

helps secure our borders between the ports of

entry by detecting, tracking, and interdicting

illegal flows of people and contraband. This

measure reports the percent of detected

entrants who were apprehended, or turned back after illegally entering the United States

between the ports of entry on the southwest border. The Border Patrol achieves this result by

maximizing the apprehension of detected illegal entrants or confirming that illegal entrants

return to the country from which they entered; and by minimizing the number of persons who

evade apprehension. In FY 2017, this measure achieved 78.9 percent which is a decrease

from FY 2016. Concurrently, border detection technology has increased, yielding greater

situational awareness of illegal entrants who previously would have gone undetected, however

agent staffing shortages reduce the ability to respond. Going forward, the Border Patrol’s

increased situational awareness will need to be paired with increased response capability. The

Department is making investments in recruitment, retention, and relocation programs to

address these challenges. Further discussion is located in the “Looking Forward” portion of

this section on page 11.

Migrant interdiction effectiveness in the

maritime environment (USCG): This measure

reports the percent of detected undocumented

migrants of all nationalities who were

interdicted by the USCG and partners via

maritime routes. Thousands of people try to

enter this country illegally every year using

maritime routes. USCG conducts patrols and

coordinates with other federal agencies and

foreign countries to interdict undocumented



migrants at sea, denying them entry via maritime routes to the United States, its territories and

possessions. Interdicting migrants at sea means they can be quickly returned to their

countries of origin without the costly processes required if they successfully enter the United

States. In its third year of reporting, the USCG achieved 83.0 percent migrant interdiction

effectiveness, up from FY 2016. This increase is primarily due to a reduction in Cuban migrant

flow following the termination of the Cuban parole policy2 in January 2017. The decrease in

Cuban migrant flow enabled USCG patrol assets to improve response and have greater

interdiction success in the Florida Straits.

Percent of imports compliant with U.S. trade

laws (CBP): Ensuring that all imports are

compliant and free of major discrepancies

allows for lawful trade into the United States and

both CBP and the importing/exporting

community have a shared responsibility to

maximize compliance with laws and regulations.

CBP works with our international trade partners

through several trade programs to build—and

improve upon—a solid and efficient trade

relationship to accomplish safer, faster, and

more compliant trade. This measure reports the

percent of imports that are compliant with U.S. trade laws including customs revenue laws. In

FY 2017, 99.4 percent of imports were found to be compliant with U.S. trade laws, meeting this

year’s target. Results have improved year-over-year for the past five-years.

A Unified Effort: Combating Transnational Gang Violence within the

Interior Borders of the United States In February 2017, President Trump signed Executive Order 13773, aimed at targeting

transnational criminal organizations (TCO), such as drug cartels or gangs like Mara Salvatrucha

(MS -13). The Executive Order is a multifaceted approach in attacking TCOs that pose a threat to

national security and/or public safety. U.S. Immigration and Customs Enforcement (ICE),

Homeland Security Investigations (HSI), remains vigilant in disrupting and dismantling violent gang

activity in collaboration with our state, local, and tribal, and foreign law enforcement partners.

Due to violence caused by members of MS-13, HSI New York established Operation Matador

(OPMAT). OPMAT is a multi-pronged approach in which HSI NY partnered with other DHS components to combat MS-13 in the

greater New York City area. OPMAT is primed to disrupt and dismantle MS-13 through five key elements: intelligence gathering;

actionable lead development; targeted enforcement; investigation development; and community outreach to at-risk youth in the

affected cities. From May 9, 2017 to June 30, 2017, OPMAT has led to 68 arrests of known gang members, 60 of which were

established as MS-13 gang members. ICE remains committed in working in a unified approach in combating gang violence and

disrupting the MS-13 pipeline.

Priority Goal: Decrease the ability of targeted transnational criminal organizations to conduct

illicit activities impacting the southern border and approaches region of the United States. By

2 On January 12, 2017, DHS eliminated a special parole policy for arriving Cuban nationals commonly known as

the “wet-foot/dry-foot” policy, as well as a policy for Cuban medical professionals known as the Cuban Medical

Professional Parole Program. It is now Department policy to consider any requests for such parole in the same

manner as parole requests filed by nationals of other countries.



September 30, 2017, actions by the DHS Joint Task Forces via synchronized component

operations will result in the disruption and/or dismantlement of 15 percent of targeted

transnational criminal organizations.

Performance Analysis: Through the execution

of coordinated operational plans and

investigations, the Joint Task Forces (JTFs)

were able to enable the disruption and

dismantlement of 12.6 percent (as of the

3rd quarter FY 20173) of their targeted

transnational criminal organizations, and is on

track to meet its goal of 15 percent for this

important work. The JTFs continue to

coordinate across organizational boundaries

to make positive advances with operations

with joint investigations and operations within

their functional areas, and are supported by

DHS operational components in order to enhance DHS’s effort in securing the U.S. Southern

Border and Approaches. JTFs facilitated broader discussions with Components and garnered

the reallocation of resources, including assets and personnel, to meet operational

requirements.

Looking Forward

The protection of the Nation’s borders—land, air, and sea—from the illegal entry of people,

weapons, drugs, and other contraband while facilitating lawful travel and trade is vital to

homeland security, as well as the Nation’s economic prosperity. The global economy is

increasingly a seamless economic environment connected by systems and networks that

transcend national boundaries. The United States is deeply linked to other countries through

the flow of goods and services, capital and labor, and information and technology across our

borders. As much as these global systems and networks are critical to the United States and

our prosperity, they are also targets for exploitation by our adversaries, terrorists, and

criminals. Below are a few initiatives that advance our efforts to secure and manage our

borders.

Increases in Border Infrastructure and Technology: Executive Order (EO) 13767, Border

Security and Immigration Enforcement Improvements, requires significant enhancement of

border infrastructure and technology. Out year planning has begun to include border barrier

system extensions and enhancements and additional assets to include: Integrated Fixed

Towers to provide automated, persistent wide area surveillance for the detection, tracking,

identification, and classification of illegal entries; Remote Video Surveillance Systems to

monitor large spans of the international border; and Cross-Border Tunnel Threat technology to

diminish the ability of transnational criminal organizations to gain unobtrusive access into the

United States through cross-border tunnels and the illicit use of underground municipal

infrastructure.

3 Final results for this measure will published in the FY 2017-2019 Annual Performance Report in early

February 2018 at https://www.dhs.gov/performance-financial-reports.

https://www.cbp.gov/frontline/new-way-forward

https://www.whitehouse.gov/the-press-office/2017/01/25/executive-order-border-security-and-immigration-enforcement-improvements

https://www.dhs.gov/performance-financial-reports



Border Patrol Staffing: EO 13767 also addresses increasing staff on the border by requiring

that DHS hire an additional 5,000 Border Patrol Agents. In response to this directive, CBP’s

Human Resource Management (HRM) office has developed a multi-year hiring plan to meet the

new staffing requirement for Border Patrol. Of the 5,000 planned agent increase, the first

surge is planned for 500 agents in FY 2018 and is in addition to the normal attrition hiring

conducted by CBP HRM. This initial hiring surge will lay the foundation in increasing

operational control in certain key areas along the border. The goal is to increase and maintain

a Border Patrol Agent workforce to attain full operational control of the border. This will be an

ongoing challenge to find qualified candidates who can pass the protocols to become a Border

Patrol Agent, including a polygraph exam, along with ensuring that those who are hired remain

in the Border Patrol and do not move to another law enforcement position within the Federal

Government or to the private sector.

Biometric Entry Exit: EO 13769, Protecting the Nation from Foreign Terrorist Entry into the

United States, addresses challenges in screening and vetting protocols and associated

technology and procedures with the visa-issuance and management process. One of the

efforts to support this Executive Order is the Biometric Entry-Exit System. The Department will

utilize the cloud-based Traveler Verification Service system and supporting information

technology infrastructure to analyze and verify travelers’ identity using biometric data such as

facial and fingerprint recognition. This will allow CBP Officers to assist airline partners and

other government agencies to verify the identity of travelers entering and exiting the United

States. The Department intends to adapt these innovative air environment technological

solutions for land and sea environments.

Mission 4: Safeguard and Secure Cyberspace

Our economic vitality and national security depend on a vast array of interdependent and

critical cybernetworks, systems, services, and resources. By statute and Presidential Directive:

DHS is the lead for the Federal Government to secure civilian government computer systems;

works with industry to defend privately owned and operated critical infrastructure; prevents,

detects, and investigates cybercrime; and works with state, local, tribal, and territorial

governments to secure their information systems.

Our goals for this area are:

Goal 4.1: Strengthen the Security and Resilience of Critical Infrastructure against Cyber

Attacks and other Hazards;

Goal 4.2: Secure the Federal Civilian Government Information Technology Enterprise;

Goal 4.3: Advance Cyber Law Enforcement, Incident Response, and Reporting

Capabilities; and

Goal 4.4: Strengthen the Cyber Ecosystem.

The following highlighted measures gauge our efforts to safeguard and secure cyberspace.

https://www.whitehouse.gov/the-press-office/2017/03/06/executive-order-protecting-nation-foreign-terrorist-entry-united-states



Percent of customers implementing at least one

cyber security assessment recommendation to

improve critical infrastructure and federal

network security (NPPD): This measure

demonstrates the percent of assessed asset

owners and operators of critical infrastructure

that are not only developing a better

understanding of their cybersecurity posture,

but are also taking action to improve that

posture. In FY 2017, 91 percent of

organizations who received an assessment also

implemented at least one cybersecurity

enhancement, down from the last two years. Making enhancements is at the discretion of the

customer and may not be implemented for a number of reasons to include funding, internal

policies and priorities, organizational maturity, and internal expertise. Note that a small

number of organizations are known to have implemented security recommendations during the

actual assessment process but these efforts were not necessarily reflected in their survey

response. Going forward, the program will review its methodology for this measure to ensure

the data collection efforts are targeted to the customers who were involved in the assessment

and improvement process.

Amount of dollar loss prevented by Secret

Service cyber investigations (in millions)

(USSS): The USSS maintains Electronic Crimes

Task Forces that focus on identifying and

locating domestic and transnational

cybercriminals connected to cyber-intrusions,

bank fraud, data breaches, and other

computer-related crimes. This measure reflects

USSS’ efforts to reduce financial losses to the

public from cybercrimes. In the second quarter

of FY 2017, the Secret Service closed an

investigation into a network intrusion impacting

a major U.S. retailer. This case involved over 4.5 million devices and substantial potential

fraud losses totaling well in excess of the annual performance target. The year-to-year results

for this performance measure are highly volatile based upon the cases closed in a particular

reporting period.

Percent of federal, civilian executive branch

personnel for whom EINSTEIN intrusion

prevention system coverage has been deployed

(NPPD): This measure gauges the intrusion

prevention coverage provided by EINSTEIN 3

Accelerated (E3A) that is currently operating on

civilian executive branch networks. E3A has the

capacity to both identify and block known

malicious traffic. This performance measure

assesses the extent to which DHS has deployed

http://www.secretservice.gov/investigation

http://www.secretservice.gov/investigation



at least one E3A countermeasure to protect federal, civilian executive branch agencies. The

FY 2017 result reflects an increase of approximately 525,000 federal civilian personnel

protected by E3A intrusion prevention services from the FY 2016 end of year result. As of

September 30, 2017, 95 percent of the federal, civilian executive branch personnel and

100 percent of Chief Financial Officer (CFO) Act agency personnel are protected by at least one

E3A countermeasure. DHS continues to work with relevant internet service providers, and

federal entities to deploy E3A at remaining Small/Micro agencies; however, these agencies

have fewer Information Technology (IT) staff, and E3A competes with resources dedicated to

day-to-day operations, and other cybersecurity initiatives and requirements.

Malware Impacts to the Nation’s Supply Chain In collaboration with the National Center for Manufacturing Sciences,

DHS’s NPPD, National Cyber Exercise and Planning Program (NCEPP)

designed an exercise to test cyber-elements of the manufacturing sector.

The June 27, 2017 exercise was held in Ann Arbor, MI with 20

stakeholder groups. It explored cyber-incident response to their discovery

of critical systems infected with malware designed to affect radio

frequency identification (RFID) components (e.g., readers, scanners, and

tags) that impact the supply chain. During this full-day tabletop exercise,

NCEPP facilitators guided exercise participants through three separate

scenarios to address the issues. This is important because the complexities associated with RFID tagging systems include

an increased potential for the exploitation of vulnerabilities. Participants discovered through this exercise that an

abundance of external resources were available to help them about which they were not aware. The exercise also

demonstrated that cyber-incident response capabilities varied widely among participating organizations. Surprisingly, larger

organizations were more likely to maintain open lines of communications and/or share cyber-threat information than smaller

entities. Cyber-exercises of this type aid in addressing the DHS Strategic Goals of strengthening the security and resilience

of critical infrastructure against cyber-attacks, and reducing risk to the Nation’s most critical infrastructure.

Priority Goal: Improve federal network security by providing federal civilian executive branch

agencies with the tools and information needed to diagnose, mitigate, and respond to

cybersecurity threats and vulnerabilities. By September 30, 2017, DHS will deliver two phases

of continuous diagnostics and mitigation tools to 100 percent of the participating federal

civilian executive branch agencies so that they can monitor their networks.

Performance Analysis: The Continuous

Diagnostics and Mitigation (CDM) program

provides federal agencies with capabilities to

identify cybersecurity risks, prioritize those

risks, and enable mitigation of the most

significant problems first. Thus it is imperative

that contracts to implement CDM on the

federal network are awarded in a timely

manner. As of the end of the first quarter of

FY 2017, the program attained its target of

100 percent with 69 agencies participating in

Phase 1 (asset management) and

65 agencies participating in Phase 2 (user management) tools. The final award for Phase 2

tools was completed the first quarter of FY 2017 and 100 percent of Phase 1 and Phase 2

have been delivered for installation to participating federal, civilian executive branch agencies.

It should be noted that not every non-Defense federal organization is currently participating in



the CDM program and this measure only reflects those agencies that have chosen to

participate in the program.

Looking Forward

Cyberspace and its underlying infrastructure are vulnerable to a wide range of risk stemming

from both physical and cyberthreat hazards. Sophisticated cyber-actors and nation-states

exploit vulnerabilities to steal information and money and are developing capabilities to

disrupt, destroy, or threaten the delivery of essential services. A range of traditional crimes are

now being perpetrated through cyberspace, including banking and financial fraud, intellectual

property violations, and other crimes, all of which have substantial human and economic

consequences. As information technology becomes increasingly integrated with physical

infrastructure operations, there is increased risk for wide-scale or high-consequence events

that could cause harm or disrupt services upon which our economy and the daily lives of

millions of Americans depend. In light of the risk and potential consequences of cyber-events,

strengthening the security and resilience of cyberspace has become an important homeland

security mission.

Continuous Diagnostics and Mitigation: The Continuous Diagnostics and Mitigation (CDM)

program provides tools, sensors, and dashboards to the 23 Chief Financial Officer (CFO) Act

agencies and is in the process of deploying a shared services CDM offering to provide the same

capabilities to non-CFO Act agencies. As part of the CDM Program, two dashboards were

developed—first the Agency Dashboard and then the Federal Dashboard. Agency Dashboards

push agency-specific summary data from federal civilian agencies to the Federal Dashboard

user interface. The Federal Dashboard provides the Office of Cybersecurity and

Communications (CS&C) with a federal enterprise view of cybersecurity risk. It provides access

to security information that will be used in a variety of ways, with new features and methods

still under development. DHS is delivering the program in phases with the first two phases in

the implementation and deployment stage. A number of agencies have successfully deployed

the first phase of the program and have begun to utilize the prioritized vulnerability information

provided to address key security weaknesses on their networks. It is anticipated that the

deployment of the second phase tools and the contract delivery of the third phase will occur in

FY 2018. DHS is planning on measuring the effectiveness of the CDM program through the

timely patching of identified critical vulnerabilities on the federal network beginning in 2018.

Many challenges are faced in this endeavor, including federal agencies prioritizing the

deployment and use of these tools, and having seasoned Chief Information Officer leadership

and staff to implement and leverage these tools to enhance federal network security. Also, it

should be noted that CDM is not currently a statutorily required program, thus there are

agencies who have chosen not to participate. DHS is working to demonstrate the benefits of

the program to those non-participatory agencies in order to make the program as robust as

possible.

Automated Indicator Sharing: In 2017, DHS made great strides in fulfilling a legislative

requirement to share cyberthreat information with both public and private sector partners in

near real time, but challenges remain. Being able to distinguish between real threats and

those that do not pose harm to information systems is an ongoing challenge for agencies want

to focus their response and corrective actions on only those threats that pose real harm. The

Automated Indicator Sharing (AIS) program rapidly expanded both the volume of cyberthreat

indicators shared and the number of public and private stakeholders participating in the



program FY 2017. The number of indicators shared through AIS increased from 100,394 in

FY 2016 to over 1.2 million in FY 2017. Federal partners participation also grew from

7 agencies in FY 2016 to 25 in FY 2017 with all 23 non-defense CFO Act agencies and two

additional agencies participating. Within DHS, all of the department’s internal security

operations centers were able to connect to AIS through the introduction of a web based

platform to share indicators within the agency in real time to protect against known threats.

Participation in the program was also extended to state governments, critical infrastructure

sectors, and trusted allied nations. The number of non-federal participants increased

dramatically from 45 in FY 2016 to 90 in FY 2017. The intent is to continue to grow the

quantity of information shared by both DHS and participating entities and further expand the

number of partners both domestically and internationally.

National Cybersecurity Protection System: The National Cybersecurity Protection System is an

integrated system that delivers a range of capabilities to include intrusion detection and

prevention, analytics, and information sharing of malicious activity on federal networks. The

system currently detects and blocks threats that are already known by DHS from harming the

federal network. While preventing known threats is important, the system currently lacks the

capability to identify and block previously unknown threats from entering federal networks. To

increase the effectiveness of the system, DHS is currently piloting a program to develop the

capability to detect previously unknown malicious activity on a network. This capability would

establish a baseline for normal network behavior and traffic and alert DHS to any deviations or

abnormalities from that baseline. This pilot program has the potential to enable DHS to

discover malicious activity and actors that were previously unknown to the information security

community and share it with public and private partners in near real time. The impact would be

improved situational awareness of cyberthreats and the ability to block our adversaries most

sophisticated attack methods. Challenges with this approach are being able to accurately

predict the nature of new threats and the impact they may cause. In addition, there is the

challenge to respond in an appropriate fashion without directing limited staff resources

unnecessarily to threats that would not have been impactful.

Strengthen National Preparedness and Resilience

Mission 5: Strengthen National Preparedness and Resilience

Despite ongoing vigilance and efforts to protect this country and its citizens, major accidents

and disasters, as well as attacks, may occur. The challenge is to build the capacity of American

communities to be resilient in the face of disasters and other threats. Our vision of a resilient

Nation is one with the capabilities required across the whole community to prevent, protect

against, mitigate, respond to, and recover from the threats and hazards that pose the greatest

risk.


Goal 5.1: Enhance National Preparedness;

Goal 5.2: Mitigate Hazards and Vulnerabilities;

Goal 5.3: Ensure Effective Emergency Response; and

Goal 5.4: Enable Rapid Recovery.



The following highlighted measures gauge our efforts to strengthen national preparedness and

resilience. Due to Hurricanes Harvey, Irma, and Maria, FEMA is unable to provide year-end

results in time for this report. As such, their 3rd quarter results are provided for context and

their final results will be available in the FY 2017-2019 Annual Performance report in early

February 2018 at https://www.dhs.gov/performance-financial-reports.

Percent of shipments for required life-sustaining

commodities (meals, water, tarps, plastic

sheeting, cots, blankets, and generators) and

key initial response resources delivered by the

agreed upon date (FEMA): This measure

evaluates the percent of shipments from FEMA

distribution centers or logistics partners that

arrive at the specified location by the validated

and agreed upon delivery date. Timely delivery

of many of these commodities are truly

life-saving as well as life-sustaining. For the past

two years, FEMA’s distribution centers and

logistics partners have met expectations.

Percent of Incident Management Assistance

Teams establishing joint federal and state

response objectives within 18 hours (FEMA):

This measure gauges the percent of time that

Incident Management Assistance Teams

(IMATs) have deployed and have established

initial joint federal and state response

objectives within 18 hours of a request from a

state or jurisdiction. IMATs are made up of

dedicated and experienced senior-level

emergency management professionals that are

able to deploy upon a moment’s notice when

requested by the state. IMATs generally consist of 10 members, with expertise in operations,

logistics, planning, and recovery. They are a rapidly deployable asset to anywhere in the region

or the country, supporting our states and territories in their emergency response efforts. For

the past five years, when called upon, IMATs have establishing joint federal and state response

objectives within 18 hours, 100 percent of the time.

Percent of incident management and support

actions taken that are necessary to stabilize

an incident that are performed within

72 hours or by the agreed upon time (FEMA):

This measure reflects FEMA's role in

effectively responding to any threat or hazard,

with an emphasis on saving and sustaining

lives within 72 hours, or by the agreed upon

time, in support of state, local, tribal and

territorial governments. "Actions necessary to


https://www.fema.gov/news-release/2006/05/16/logistics-centers

https://www.fema.gov/news-release/2006/05/16/logistics-centers

https://www.fema.gov/incident-management-assistance-teams



stabilize an incident" are defined as those functions that must be initiated immediately

following an incident in order to ensure the best outcomes for survivors. These actions include

establishing joint federal/state incident objectives and interoperable communications between

FEMA-supported incident sites, deploying urban search and rescue resources, rapidly activating

response coordination centers, and issuing timely alerts, warnings, operations orders, and

situation reports. For the past five years, incident management and support actions have been

performed within 72 hours, or by the agreed upon time, 100 percent of the time.

Percent of people in imminent danger saved in

the maritime environment (USCG): This is a

measure of the percent of people who were in

imminent danger on the oceans and other

waterways and whose lives were saved by

USCG search and rescue teams. The number

of lives lost before and after the USCG is

notified and the number of persons missing at

the end of search operations are factored into

this percentage. Several factors hinder

successful response including untimely distress

notification to the USCG, incorrect distress site

location reporting, severe weather conditions at the distress site, and distance to the scene.

The USCG saved more than 4,200 lives in FY 2017, which was 78.8 percent of those in danger,

and is consistent with long-term results and trends. The target for this measure will likely be

adjusted in FY 2018 to be ambitious but more in-line with historical results. The USCG will

continue to plan, train, develop better technologies, and invest in capable assets to continue

their exemplary performance in saving lives in the maritime environment.

Surge Capacity Force In the aftermath of a catastrophic event, DHS turns to its Surge Capacity

Force, a cadre of federal employee heroes who help affected

communities by supporting the Federal Emergency Management

Agency’s (FEMA) urgent response and recovery efforts. The Surge

Capacity Force is made up of federal employees from every Department

or Agency in the Federal Government.

The Post-Katrina Emergency Management Reform Act of 2006 (Public Law 109-295) established the Surge Capacity Force to

deploy federal employees in the aftermath of a catastrophic event to help support response and recovery efforts. DHS

activated the Surge Capacity Force for the first time in 2012 in support of Hurricane Sandy. More than 1,100 (non-FEMA)

federal employees deployed to New York and New Jersey to supplement FEMA’s substantial disaster workforce.

In the immediate aftermath of Hurricanes Harvey, Irma, and Maria, Acting Secretary of Homeland Security Elaine Duke

activated the Surge Capacity Force—the second time in the Surge Capacity Force existence. Surge Capacity Force volunteers

from throughout the Federal Government supported disaster survivors in Texas, Florida, Puerto Rico, and the U.S. Virgin

Islands. As of September 21, 2107, more than 2,000 federal employees were deployed for these relief efforts.

Priority Goal: Enhance the Nation’s ability to respond to and recover from a catastrophic

disaster through whole community preparedness and partnership. By September 30, 2017,

70 percent of states and territories will achieve an intermediate or above proficiency toward

meeting the targets established through their Threat and Hazard Identification and Risk

Assessment (THIRA).

https://www.gocoastguard.com/about-the-coast-guard/discover-our-roles-missions/search-and-rescue

https://www.dhs.gov/topic/surge-capacity-force


https://www.fema.gov/threat-and-hazard-identification-and-risk-assessment



Performance Analysis: This measure assesses

the percent of state and territorial State

Preparedness Report (SPR) ratings at or above

the 3.0 threshold when averaging across the

planning, organization, equipment, training, and

exercise elements rated by grantees for each

core capability. While the target was narrowly

missed in FY 2016, all indications are that the

FY 2017 target will be met; however, due to

Hurricanes Harvey, Irma, and Maria, FEMA is

unable to provide year-end results in time for

this report. The results will be available in the

FY 2017-2019 Annual Performance report in early February 2018 at

https://www.dhs.gov/performance-financial-reports.

Looking Forward

The Department coordinates comprehensive federal efforts to prepare for, protect against,

respond to, recover from, and mitigate a terrorist attack, natural disaster or other large-scale

emergency, while working with individuals, communities, the private and nonprofit sectors,

faith-based organizations, and federal, state, local, tribal, and territorial partners to ensure a

swift and effective recovery effort. Hurricanes Harvey, Irma, and Maria remind us all of the

importance of preparedness and resilience in the face of disaster. Below are a few initiatives

that advance our efforts to achieve our preparedness and resilience goals.

National Flood Insurance Program: The Department administers the National Flood Insurance

Program (NFIP) to reduce the impact of flooding on private and public structures. The NFIP

takes a multi-faceted approach that includes providing affordable insurance to property owners

while also encouraging communities to adopt floodplain management regulations and invest in

mitigation efforts; however, challenges exist in maintaining the viability of this program. To

address the financial stability of the NFIP, DHS plans to support long term reauthorization of

the NFIP by promoting transparency around the NFIP’s revenue, expenses, risk exposure, and

available risk management tools as NFIP reauthorization-related discussions progress with

DHS, the Administration, and Congress. FEMA is leveraging existing investments in analytic

capacity and engagements with the reinsurance industry to better understand the NFIP’s risk

profile and appropriate risk management strategies.

Disaster Workforce Structure: In order to be prepared for all hazards, the Department has

made numerous advancements in the past decade to the disaster response workforce. The

establishment of the Surge Capacity Force allows the capacity for the Department to deploy its

employees in support of FEMA’s existing workforce for a large-scale disasters as seen this year

with Hurricanes Harvey, Irma, and Maria. The Department continues to innovate and learn

from other agencies, such as developing a centralized reception, staging, onward movement,

and integration process and collaborating with the Corporation for National and Community

Service. FEMA has made progress, but is still far from its desired workforce structure. Moving

forward, FEMA is conducting research to understand the barriers that prevent it from reaching

its disaster workforce structure. Additionally, it is continuing to learn from other agencies and


https://www.fema.gov/national-flood-insurance-program

https://www.fema.gov/national-flood-insurance-program




will take lessons learned from Hurricanes Harvey, Irma, and Maria to address this critical need

in times of crisis.

Enforce and Administer Our Immigration Laws

Mission 3: Enforce and Administer Our Immigration Laws

A fair and effective immigration system enriches American society, unifies families, and

promotes our security. Our Nation’s immigration policy plays a critical role in advancing

homeland security.


Goal 3.1: Strengthen and Effectively Administer the Immigration System; and

Goal 3.2: Prevent Unlawful Immigration.

The following highlighted measures gauge our efforts to enforce and administer our

immigration laws.

Average of processing cycle time (in months) for

naturalization applications (N-400) (USCIS):

This measure assesses the program's ability to

meet its published processing time goals for

N-400, Application for Naturalization which is

filed by lawful permanent residents to attain

U.S. citizenship. Naturalization applications

were 26 percent higher than projected in

FY 2016 and are again higher than planned in

FY 2017 by 14 percent. USCIS is continuing to

shift resources and prioritize workload in order

to handle its case volume. Although the cycle

time is above the target, USCIS has maintained the accuracy of N-400 decisions as validated

through random sampling. USCIS continues to face capacity challenges which, combined with

higher workload demands, will continue to negatively impact our cycle time. During FY 2018,

USCIS will continue to balance workload to ensure national cycle time parity across each of its

88 field offices and leverage overtime and other scheduling options.

Percent of customers satisfied with the

citizenship and immigration-related support

received from the National Customer Service

Center (USCIS): This measure gauges the

overall rating of the immigration process and is

based on the results from the following areas:

1) accuracy of information;

2) responsiveness to customer inquiries;

3) accessibility to information; and

4) customer satisfaction.

https://www.uscis.gov/n-400



The FY 2017 result for this measure is consistent with the results for the past four years;

however, there has been a slight decline the past two years which is most likely due to the

fluidity in the immigration policy environment making it more difficult to satisfy customers’

questions in some instances. Results are still indicative of the attention USCIS has given to the

customer service approach, especially given the increased demand. USCIS is constantly

listening to customer feedback and taking deliberate steps to improve the level of service

provided to its customers. USCIS’ customer service rating is well above the Federal

Government Citizen Experience Benchmark of 78 percent as reported by American Customer

Satisfaction Index in their latest report published on January 31, 2017.

Percent of applications for citizenship and

immigration benefits not approved following a

potential finding of fraud (USCIS): This measure

reflects the Department’s capacity to prevent

fraud, abuse, and exploitation of the immigration

system, and helps identify systemic

vulnerabilities that threaten its integrity. By not

approving benefits to individuals potentially

attempting to commit fraud, and who were not

eligible for a waiver or exemption, USCIS is

actively eliminating vulnerabilities, and

identifying ways to continue to deter and prevent

fraud in the future. Slightly up from FY 2016 results, the initial findings of fraud were upheld

91.7 percent of the time. Initial findings of fraud are reviewed by USCIS’ Fraud Detection and

National Security Directorate (FDNS) before final adjudication is rendered. FDNS was created

in 2004 in order to strengthen USCIS’ efforts to ensure immigration benefits are not granted to

individuals who pose a threat to national security or public safety, or who seek to defraud our

immigration system. USCIS continues to improve communication between fraud officers and

adjudicators with the assistance of improved reporting tools and investments in new

technologies.

USCIS Naturalizes 15,000 New Citizens during

Independence Day On the 241st anniversary of the Declaration of Independence and the birth of the

United States, 15,000 lawful permanent residents were naturalized as U.S. citizens

during more than 65 naturalization ceremonies across the country. The number of

new citizens naturalized on July 4, 2017 was the most in recent years. Local, state,

and federal officials attended ceremonies that were held at public libraries, national

parks, and museums. Teresa Nieves-Chinchilla was one of 22 people from

16 countries who were naturalized at the July Fourth naturalization ceremony in Annapolis, Maryland. Shortly before the

ceremony, she had returned from a trip to her home country of Spain and in her mailbox was a long-awaited letter granting

her dream—she could finally become an American citizen. Nieves-Chinchilla had been living in the U.S. for 11 years, studying

space weather and solar activity at the Catholic University of America’s Institute for Astrophysics and Computational Sciences,

located at NASA’s Goddard Space Flight Center in Greenbelt, Maryland. “This country gave me the opportunity to be a

scientist, to make my life” she said.

USCIS is committed to promoting instruction and training on citizenship rights and responsibilities by offering a variety of free

citizenship preparation resources for applicants, educators, and organizations that can be found online at the Citizenship

Resource Center (www.uscis.gov/citizenship). Immigrant-serving organizations can register at

www.uscis.gov/citizenship/organizations/civics-and-citizenship-toolkit to receive a free Civics and Citizenship Toolkit to help

them develop content for classes and train staff and volunteers.

https://www.uscis.gov/

http://www.theacsi.org/news-and-resources/customer-satisfaction-reports/reports-2016/acsi-federal-government-report-2016

http://www.theacsi.org/news-and-resources/customer-satisfaction-reports/reports-2016/acsi-federal-government-report-2016

https://www.uscis.gov/about-us/directorates-and-program-offices/fraud-detection-and-national-security/fraud-detection-and-national-security-directorate

https://www.uscis.gov/about-us/directorates-and-program-offices/fraud-detection-and-national-security/fraud-detection-and-national-security-directorate

http://www.uscis.gov/citizenship

http://www.uscis.gov/citizenship/organizations/civics-and-citizenship-toolkit



Looking Forward

The success of our Nation’s immigration policy plays a critical role in advancing homeland

security. The Department is focused on smart and effective enforcement of U.S. immigration

laws while streamlining and facilitating the legal immigration process. Effective administration

of the immigration system depends on ensuring that immigration decisions are impartial,

lawful, and sound; that the immigration system is interactive and user friendly; that policy and

procedural gaps are systematically identified and corrected; and that those vulnerabilities

which would allow persons to exploit the system are eliminated. Below are a few initiatives that

advance our efforts to achieve the Department’s immigration enforcement and administration

goals.

USCIS’ Improvement Plans: USCIS secures America’s promise as a Nation of immigrants by

granting citizenship and immigration benefits, promoting awareness and understanding of

citizenship, ensuring the integrity of the immigration system, and providing accurate and useful

information to its customers. Over the past few years, the number of applications for benefits

and benefit changes has ballooned to more than 8 million transactions per year creating a

challenge to process applications in a timely fashion. The sheer volume of work has led USCIS

to leverage a suite of technology tools that give customers faster and easier access to

immigration information. The flagship of the newest suite of tools is myUSCIS, an online

one-stop shop for immigration information. The success of myUSCIS will be leveraged to

expanded service to continue to provide value, relevance, and reach for customers and

stakeholders.

Enhancing Public Safety in the Interior of the United States: EO 13768, Enhancing Public

Safety in the Interior of the United States, aims to effectively address those individuals who

illegally enter the United States and those who overstay or otherwise violate the terms of their

visas. Historically, surges of illegal immigration at the southern border with Mexico has placed

a significant strain on federal resources and overwhelmed those agencies charged with border

security and immigration enforcement. One of the provisions of the EO addresses this need by

hiring 10,000 Immigration and Customs Enforcement Law Enforcement Officers (LEOs) and

related support staff. The FY 2018 budget includes plans for the first 1,000 LEOs, and plans

are in place to onboard the remaining staff over a multi-year horizon.

Mature and Strengthen Homeland Security

The objectives for maturing and strengthening the Department were designed to bolster key

activities and functions that support the success of our strategic missions and goals. Ensuring

a shared awareness and understanding of risks and threats, building partnerships,

strengthening our international enterprise structure, enhancing the use of science and

technology, with a strong service and management team underpin our broad efforts to ensure

our front-line operators have the resources they need to fulfill the missions of the Department.

Our mature and strengthen goals are:

Integrate Intelligence, Information Sharing, and Operations;

Enhance Partnerships and Outreach;

Strengthen the DHS International Affairs Enterprise in Support of Homeland Security

Missions;

https://my.uscis.gov/

https://www.whitehouse.gov/the-press-office/2017/01/25/presidential-executive-order-enhancing-public-safety-interior-united



Conduct Homeland Security Research and Development;

Ensure Readiness of Frontline Operators and First Responders; and

Strengthen Service Delivery and Manage DHS Resources.

Performance measures associated with the Department’s Mature and Strengthen Homeland

Security focus support evaluation of the operational aspects of the headquarters offices.

A small number of measures aligned to this area are displayed below, and the full set can be

found in the DHS Congressional Justification Overview Chapter for the Office of the Under

Secretary for Management at https://www.dhs.gov/dhs-budget.

Percent of favorable responses by DHS

employees on the Employee Engagement Index

of the annual employee survey: This measure is

based on positive response rates by DHS

employees to the Employee Engagement Index

(EEI) of the annual Federal Employee Viewpoint

Survey (FEVS) administered by the Office of

Personnel Management. The EEI is comprised of

three sub-indices—Leaders Lead, Supervisors,

and Intrinsic Work Experiences. Based upon the

2017 FEVS data, DHS’s EEI climbed to

60 percent, a four point improvement over last

year’s results. This increase in EEI is the largest of any Cabinet-level agency in FY 2017.

Further, DHS had the largest increase in its Global Satisfaction Index (GSI), gaining six

percentage points from last year’s 49 percent rating. Both USCIS and USCG have EEI scores

above any of the Cabinet-level agencies, at 74 percent. Acting Secretary, Elaine Duke stated,

“This progress has been no easy feat, and I am happy to see that these results reflect the

tireless efforts taken throughout the Department to promote a culture of collaboration and

engagement. As a Department, we have taken tremendous strides in recent years,

continuously working to ensure that all employees at DHS feel supported, empowered, and

equipped to successfully execute the duties and responsibilities necessary in maintaining the

safety and security of the Nation.”

Number of intelligence reports shared with the

intelligence community: This measure reflects

the DHS contribution of raw, unevaluated

intelligence, to the intelligence community and

the Federal Government so as to share the

unique information obtained from intelligence

officers in the field. In FY 2017, I&A

disseminated 3,602 raw intelligence

information reports, exceeding its FY 2017 goal

by 34 percent. During the fiscal year, I&A was

able to inform intelligence analysis, watchlisting

and policy by sharing raw intelligence from a

variety of DHS sources. Several key factors enabled I&A to succeed including streamlining our

reporting processes and automating research techniques. These changes enhanced I&A’s

https://www.dhs.gov/dhs-budget



ability to support our customer’s needs and reduce the time it takes to identify information that

has value for intelligence purposes.

Percent of Partner Organizations that agree the

Federal Law Enforcement Training Centers

training programs address the right skills (e.g.,

critical knowledge, key skills and techniques,

attitudes/behaviors) needed for their

officers/agents to perform their law enforcement

duties (FLETC): The results of this measure

provide on-going opportunities for improvements

that are incorporated into FLETC’s training

curricula, processes, and procedures. FLETC

perennially performs very well on this

measure—greater than 90 percent for the past

five years—as they have a very singularly focused mission to provide career-long training to law

enforcement professionals to help them fulfill their responsibilities safely and proficiently. Over

the past 46 years, FLETC has grown into the Nation’s largest provider of law enforcement

training.

Innovative Veterans Hiring Event The recent Executive order signed on January 25, 2017 mandates the

enhancement of public safety in the interior of the United States. The

Secretary has the responsibility of ensuring 10,000 additional immigration

officers are hired to secure the United States borders, and enforce

immigration laws. In an effort to assist with achieving this goal, and

increase veteran hiring numbers, the Office of the Chief Human Capital

Officer worked jointly with representatives from every DHS Component to

sponsor a two-day “Continue Your Service to America” veteran recruitment

and hiring event. Veterans currently make up 27.9 percent of the

Department’s workforce. Prior to the event, the Office of the Chief Human

Capital Officer, U.S. Citizenship and Immigration Services, Customs and Border Protection, U.S. Immigration and Customs

Enforcement, delivered a series of veteran hiring event webinar learning sessions for veterans across the United States.

The webinars assisted veterans with uploading their resumes to USAJOBS and making them searchable by federal agencies.

More than 5,000 veterans participated in the webinars.

The hiring event held August 22-23, 2017 was attended by 2,570 veterans representing each branch of the military. As a

result of the partnership between DHS Components for the event, over 600 veterans were interviewed, an estimated

125 tentative job offers were made, and approximately 375 candidates were moved to the next phase of the law

enforcement hiring process. An innovative approach of interviewing, providing temporary job postings, and initiating the

security process at the hiring event will reduce the time to hire these candidates. The hiring process generally takes four to

six months to onboard an employee. Through the innovation of webinar learning sessions and an abbreviated temporary

job posting and security process, DHS is able to acquire highly trained, and highly-talented veterans in an expedited manner

to continue their service to America by supporting the DHS mission.

Looking Forward

Maturing and strengthening the Department and the entire homeland security enterprise—the

collective efforts and shared responsibilities of federal, state, local, tribal and territorial,

nongovernmental and private-sector partners, as well as individuals, families, and

communities—is critical to the Department’s success in carrying out its core missions and

operational objectives.



Formalizing the Requirements Process: DHS’s maturation and challenge includes improving

numerous business practices necessary for supporting front line operations that must combat

evolving threats and ensuring efficient operations. An important advancement for the

Department along this journey is formalizing the requirements process. Gains in this effort

come from the Department wide Joint Requirements Council (JRC) and the

Radiological/Nuclear Requirements Oversight Council (RNROC). The JRC provides oversight of

the DHS requirements generation process by validating capability gaps, needs, and

requirements based on capability analysis. The RNROC charter is to oversee the requirements

process specific to radiological/nuclear detection and nuclear forensics, vetting Component

requirements, and leading to the fielding of effective solutions prior to validation by the JRC.

Both efforts are advancing requirements development in DHS and will ensure efficient and

effective operations into the future.

Office of the Chief Human Capital Officer: DHS continues to implement a results-oriented

annual planning process to support the strategic management of human capital resources.

Several key department-wide initiatives will occur in the coming year to bring the human capital

community together in a unity of effort. The Department will develop an enterprise approach

for co-branding DHS and Components in all human capital outreach efforts including

advertising, marketing, and social media. DHS will also develop a process to automate and

streamline data collection to provide leadership with real-time information to evaluate the

return on investment achieved related to hiring initiatives. Furthermore, the Department is

creating career pathing with online resources, assessment tools, and skill-building

opportunities for the 1800 job series occupations (Inspection, Investigation, Enforcement, and

Compliance), Human Resources occupations (201 job series), and other select Management

lines of business occupations. Lastly, DHS will leverage existing Component programs to

develop a department-wide Resilience and Family Readiness Program to support families when

front-line employees need to be deployed to other geographic locations.

Financial Stewardship: DHS is expending resources to raise the baseline of our security

posture, necessitating the continued evolution of the business processes and systems

supporting mission delivery. With the magnitude and scope of threats continuing to grow and

change every day, DHS is further maturing our resource agility and efficiency. Enterprise risk

management (ERM) is foundational to delivering on the DHS mission and objectives, and

integrated into each phase of the planning to execution processes. A critical aspect of the

Department’s integrated ERM approach is the continued maturation of a robust internal control

program, ensuring taxpayer funds are expended as efficiently and effectively as possible while

preventing and detecting fraud, waste and abuse. Using a risk based approach and the U.S.

Government Accountability Office (GAO) criteria for standards for internal control, DHS

assessed its internal control maturity by Component and key deficiency category. This Internal

Control Maturity Model baseline served as the Department’s starting point to measure

substantial progress in addressing weaknesses and sustaining a strong control environment.

The Department’s comprehensive enterprise approach to remediation are driving and

sustaining continuous progress, as evidenced by the ability to downgrade the Property material

weakness this fiscal year. DHS will continue demonstrating strong financial stewardship,

executing the multi-year strategy to remediate our two remaining material weaknesses in

Financial Reporting and Information Technology controls and achieve a clean Internal Control

over Financial Reporting opinion.



Financial Overview

The Department’s principal financial statements—Balance Sheet, Statement of Net Cost,

Statement of Changes in Net Position, Statement of Budgetary Resources, and Statement of

Custodial Activity—report the financial position and results of operations of the Department,

including long-term commitments and obligations. The statements have been prepared

pursuant to the requirements of Title 31, United States Code, Section 3515(b), in accordance

with U.S. generally accepted accounting principles and the formats prescribed by OMB. These

statements are in addition to the financial reports used to monitor and control budgetary

resources, which are prepared from the same books and records. The statements should be

read with the realization that they are for a component of the Federal Government, a sovereign

entity. KPMG LLP performed the audit of the Department’s principal financial statements.

Financial Position

The Department prepares its Balance Sheet, Statement of Net Cost, and Statement of Changes

in Net Position on an accrual basis, in accordance with generally accepted accounting

principles; meaning that economic events are recorded as they occur, regardless of when cash

is received or disbursed.

The Balance Sheet presents the resources owned or managed by the Department that have

future economic benefits (assets) and the amounts owed by DHS that will require future

payments (liabilities). The difference between the Department’s assets and liabilities is the

residual amount retained by DHS (net position) that is available for future programs and capital

investments.

Financial Position ($ in millions) FY 2017 FY 2016 $ Change % Change

Fund Balance with Treasury $ 71,466 $ 58,997 $ 12,469 21%▲

Property, Plant, and Equipment 21,887 21,220 667 3%▲

Other Assets 18,358 17,413 945 5%▲

Total Assets 111,711 97,630 14,081 14%▲

Federal Employee and Veterans’ Benefits 58,715 58,028 687 1%▲

Debt 30,440 23,017 7,423 32%▲

Accounts Payable 4,278 3,868 410 11%▲

Deferred Revenue and Advances 5,799 3,795 2,004 53%▲

Insurance Liabilities 12,331 3,196 9,135 >100%▲

Accrued Payroll 2,276 2,114 162 8%▲

Other Liabilities 7,654 7,492 162 2%▲

Total Liabilities 121,493 101,510 19,983 20%▲

Total Net Position (9,782) (3,880) (5,902) <-100%▼

Total Liabilities and Net Position $ 111,711 $ 97,630 $ 14,081 14%▲

Results of Operations ($ in millions) FY 2017 FY 2016 $ Change % Change

Gross Cost $ 80,683 $ 69,404 $ 11,279 16%▲

Less: Revenue Earned (13,786) (14,499) 713 -5%▼

Net Cost Before Gains and Losses on

Assumption Changes

66,897 54,905 11,992 22%▲

Gains and Losses on Assumption Changes (494) 234 (728) <-100%▼

Total Net Cost $ 66,403 $ 55,139 $ 11,264 20%▲



Assets – What We Own and Manage

Assets represent amounts owned or managed by the Department that can be used to

accomplish its mission.

The Department’s largest asset is Fund Balance with

Treasury (FBwT), which consists primarily of

appropriated, revolving, trust, deposit, receipt, and

special funds remaining at the end of the fiscal year.

Property, Plant, and Equipment (PP&E) is the second

largest asset, and include buildings and facilities,

vessels, aircraft, construction in progress, and other

equipment. In acquiring these assets, the

Department either spent resources or incurred a

liability to make payment at a future date; however,

because these assets should provide future benefits to help accomplish the DHS mission, the

Department reports these items as assets rather than expenses.

Other Assets includes items such as investments, accounts receivable, cash and other

monetary assets, taxes, duties and trade receivables, direct loans, and inventory and related

property.

As of September 30, 2017, the Department had $111.7 billion in assets, representing a

$14.1 billion increase from FY 2016. The majority of this change is due to the increase in

FEMA’s FBwT to support disaster relief efforts for the significant hurricanes that struck the

United States this past year.

Liabilities – What We Owe

Liabilities are the amounts owed to the public or other federal agencies for goods and services

provided but not yet paid for; to DHS employees for wages and future benefits; and for other

liabilities.

The Department’s largest liability is for Federal

Employee and Veterans’ Benefits (FEVB). The

Department owes these amounts to current and past

civilian and military personnel for pension and other

post-employment benefits. The liability also includes

medical costs for approved workers’ compensation

cases. For more information, see Note 16 in the

Financial Information section. This liability is not

covered by current budgetary resources, and the

Department will use future appropriations to cover

these liabilities (see Note 14 in the Financial

Information section).

Debt is the second largest liability, and results from Treasury loans and related interest payable

to fund FEMA’s NFIP and Disaster Assistance Direct Loan Program. Given the current premium

rate structure, FEMA will not be able to pay its debt from the premium revenue alone;

64%

20%

16%

FBwT PP&E Other

48%

25%

10%

17%

FEVB Debt Insurance Liabilities Other



therefore, legislation will need to be enacted to provide funding to repay the Treasury. This is

discussed further in Note 15 in the Financial Information section.

Insurance Liabilities represent an estimate of NFIP claim activity based on the loss and loss

adjustment expense factors inherent to the NFIP insurance underwriting operations, including

trends in claim severity and frequency.

Other Liabilities include amounts owed to other federal agencies and the public for goods and

services received by the Department, amounts received by the Department for goods or

services that have not been fully rendered, unpaid wages and benefits for current DHS

employees, and amounts due to the Treasury’s general fund, environmental liabilities, refunds

and drawbacks, and other.

As of September 30, 2017, the Department reported approximately $121.5 billion in total

liabilities. Total liabilities increased by approximately $20 billion in FY 2017. FEMA’s disaster

response costs and related increases in FEMA’s debt to Treasury along with projected future

flood claims drives most of this increase in liabilities.

Net Position

Net position represents the accumulation of revenue, expenses, budgetary, and other financing

sources since inception, as represented by an agency’s balances in unexpended appropriations

and cumulative results of operations on the Statement of Changes in Net Position. Financing

sources increase net position and include, but are not limited to, appropriations, user fees, and

excise taxes. The net costs discussed in the section below as well as transfers to other

agencies decrease net position. The Department’s total net position is $(9.8) billion because

of significant expenses related to NFIP, as well as pension liabilities for USCG and USSS, which

are funded for the current year only. Total net position decreased approximately $6 billion from

FY 2016, in large part because of the cost associated with hurricane relief efforts.

Results of Operations

The Department operates under one unified mission: With honor and integrity, we will

safeguard the American people, our homeland, and our values. The FY 2014-2018 Strategic

Plan further details the Department’s missions and focus area, which are grouped into four

major missions in the Statement of Net Cost and related footnotes to allow the reader of the

Statement of Net Cost to clearly see how resources are spent towards the common goal of a

safe, secure, and resilient Nation.

Net cost of operations before gains and losses

represents the difference between the costs incurred

and revenue earned by DHS programs. The

Department’s net cost of operations before gains and

losses increased by approximately $11 billion in

FY 2017. DHS incurred a significantly larger gross

cost this year to support response and recovery

efforts related to the recent hurricanes.

During FY 2017, the Department earned

approximately $13.8 billion in exchange revenue.

44%

37%

13%6%

Foster a Safe and Secure HomelandStrengthen National Preparedness and ResilienceEnforce and Administer Our Immigration LawsMature and Strengthen Homeland Security





Exchange revenue arises from transactions in which the Department and the other party

receive value and that are directly related to departmental operations. The Department also

collects non-exchange duties, taxes, and fee revenue on behalf of the Federal Government.

This non-exchange revenue is presented in the Statement of Custodial Activity or Statement of

Changes in Net Position, rather than the Statement of Net Cost.

Budgetary Resources

Budgetary accounting principles require recognition of the obligation of funds according to legal

requirements, which in many cases happens prior to the transaction under accrual basis. The

recognition of budgetary accounting transactions is essential for compliance with legal

constraints and controls over the use of federal funds. The budget represents our plan for

efficiently and effectively achieving the strategic objectives to carry out our mission and to

ensure that the Department manages its operations within the appropriated amounts using

budgetary controls.

Sources of Funds ($ in millions) FY 2017 FY 2016 $ Change % Change

Unobligated Balance from Prior Year Authority $ 15,341 $ 18,113 $ (2,772) -15%▼

Appropriations 68,224 58,644 9,580 16%▲

Spending Authority from Offsetting

Collections

10,971 11,355 (384) -3%▼

Borrowing Authority 7,427 1 7,426 >100%▲

Total Budgetary Authority $ 101,963 $ 88,113 $ 13,850 16%▲

The Department’s budgetary resources were

approximately $102 billion for FY 2017.

The authority was derived from $15.4 billion in

authority carried forward from FY 2016,

appropriations of $68.2 billion, $11 billion in

collections, and $7.4 billion in borrowing authority.

Budgetary resources increased approximately

$14 billion from FY 2016. FEMA received a

supplemental appropriation to respond to the

significant disasters at the end of the fiscal year.

Additionally, FEMA borrowed $7.4 billion in FY 2017

to pay insurance claims against the NFIP. Both of these served to increase the Department’s

budget authority significantly in FY 2017.

Of the total budget authority available, the Department incurred a total of $81.9 billion in

obligations from salaries and benefits, purchase orders placed, contracts awarded, or similar

transactions.

15%

67%

11%

7%

Unobligated Balance from Prior Year AuthorityAppropriationsSpending Authority from Offsetting CollectionsBorrowing Authority



Custodial Activities

The Statement of Custodial Activity is prepared using the modified cash basis. With this

method, revenue from cash collections is reported separately from receivable accruals, and

cash disbursements are reported separately from payable accruals.

Cash Collections ($ in millions) FY 2017 FY 2016 $ Change % Change

Cash Collections $ 34,835 $ 35,142 $ (307) -1%▼

Excise Tax 3,631 3,430 201 6%▲

Other 1,810 1,684 126 7%▲

Total Cash Collections $ 40,276 $ 40,256 $ 20 0%▲

Custodial activity includes the revenue collected by the

Department on behalf of others, and the disposition of

that revenue to the recipient entities. Non-exchange

revenue is either retained by the Department to further its

mission or transferred to Treasury’s general fund and

other federal agencies.

Custom duties collected by CBP account for 86 percent of

total cash collections. The remaining 14 percent is

comprised of excise taxes, user fees, and various other

fees.

Other Key Regulatory Requirements

For a discussion on DHS’s compliance with the Prompt Payment Act, and Debt Collection

Improvement Act of 1996, see the Other Information section.

86%

9%5%

Custom Duties Excise Tax Other



Secretary’s Assurance Statement

November 14, 2017

The Department of Homeland Security management team is responsible

for meeting the objectives of the Federal Managers’ Financial Integrity

Act of 1982 (FMFIA) by managing risks and maintaining effective internal

control over three internal control objectives: effectiveness and

efficiency of operations; reliability of financial reporting; and compliance

with applicable laws and regulations. The Department conducted its

assessment of risk and internal control in accordance with the Office of

Management and Budget (OMB) Circular No. A-123, Management’s

Responsibility for Enterprise Risk Management and Internal Control.

Based on the results of the assessment, the Department can provide

reasonable assurance that internal control over operations, reporting,

and compliance were operating effectively as of September 30, 2017

except for the disclosures noted in the subsequent sections.

Pursuant to the DHS Financial Accountability Act (FAA), the Department is required to obtain an

opinion on its internal control over financial reporting. The Department conducted its

assessment of the effectiveness of internal control over financial reporting in accordance with

Appendix A of OMB Circular A-123 and Government Accountability Office (GAO) Standards for

Internal Control. Based on the results of this assessment, the Department can provide

reasonable assurance that its internal control over financial reporting was designed and

operating effectively, with the exception of the following two areas: 1) Financial Reporting and

2) Information Technology Controls and Systems Functionality, where material weaknesses

have been identified and remediation is in process, as further described in the Management

Assurances section of the Agency Financial Report.

In addition, the material weakness related to Information Technology (IT) Controls and Systems

Functionality stated above affects the Department's ability to fully comply with the Federal

Financial Management Improvement Act of 1996 (FFMIA) financial management system

requirements, and therefore the Department is also reporting a noncompliance with FFMIA.

As a result of our assessments conducted, I am pleased to report that the Department has

made progress in enhancing its internal controls and financial management program and

continues to plan for additional improvements going forward.

Sincerely,

Elaine C. Duke

Acting Secretary of Homeland Security



Management Assurances

DHS management is responsible for establishing, maintaining, and assessing internal control

to provide reasonable assurance that the objectives of the Federal Managers’ Financial

Integrity Act of 1982 (31 United States Code 3512, Sections 2 and 4) and the Federal Financial

Management Improvement Act of 1996 (Pub. L. 104-208), as prescribed by the GAO Standards

for Internal Control in the Federal Government known as the Green Book, are met. In addition,

the Department of Homeland Security Financial Accountability Act (Pub. L. 108-330) requires a

separate management assertion and an audit opinion on the Department’s internal control

over financial reporting.

In FY 2014, GAO revised the Green Book effective beginning FY 2016 and for the Federal

Managers’ Financial Integrity Act reports covering that year. The Green Book provides

managers the criteria for an effective internal control system, organized around internal control

components, principles, and attributes. In FY 2016, the OMB revised Circular No. A-123,

Management’s Responsibility for Enterprise Risk Management and Internal Control. The

revisions emphasize the integration of risk management and internal controls within existing

business practices across an Agency. Updates to the Circular were effective in FY 2016, with

the implementation of enterprise risk management requirements effective in FY 2017. Circular

A-123, Appendix A, Internal Control over Financial Reporting, remains in effect.

Federal Managers’ Financial Integrity Act, Section 2

Since Circular No. A-123 became effective 2006, DHS has worked extensively to establish,

maintain, and assess internal controls. The Department has made considerable improvements

in internal controls over operations, reporting, and compliance through the extensive work of

staff and management at Headquarters and in the Components.

In accordance with Circular A-123, the Department performs assessments over the

effectiveness of its internal controls. The results of these assessments provide management

with an understanding of the effectiveness and efficiency of programmatic operations,

reliability of financial reporting, and compliance with laws and regulations. Management

performs an analysis on the pervasiveness and materiality over any identified deficiencies to

determine their impact. Based on the results of these assessments, the Secretary provides

assurances over the Department’s internal controls in the annual assurance statement.

Any deficiency identified as a material weakness within internal control over financial

reporting is defined as a deficiency, or a combination of deficiencies, in internal control, such

that there is a reasonable possibility that a material misstatement of the entity’s financial

statements will not be prevented, or detected and corrected, on a timely basis. To identify

material weaknesses and non-compliance, management used the following criteria:

Significant enough to report outside the Agency as a material weakness;

Impacts the operating effectiveness of Entity-Level Controls;

Impairs fulfillment of essential operations or mission;

Deprives the public of needed services;

Significantly weakens established safeguards against waste, loss, unauthorized use or

misappropriation of funds, property, other assets, or conflicts of interest;

Substantial non-compliance with laws and regulations; and



Financial management systems conformance to government-wide systems

requirements.

The Department instituted an Accountability Structure, which includes a Senior Management

Council (SMC), the Risk Management and Assurance (RM&A) Division, and a Senior

Assessment Team (SAT). The SMC approves the level of assurances for the Secretary’s

consideration and is comprised of the Department’s Under Secretary for Management, Chief

Financial Officer, Chief Readiness Support Officer, Chief Human Capital Officer, Chief

Information Officer, Chief Information Security Officer, Chief Security Officer, and Chief

Procurement Officer.

The RM&A Division seeks to integrate and coordinate internal control assessments with other

internal control related activities and incorporates results from all of the Department’s lines of

business to address cross-cutting internal control issues. Finally, the SAT, led by the Chief

Financial Officer and overseen by RM&A, is comprised of senior-level financial managers

assigned to carry out and direct Component-level internal control over financial reporting

assessments.

Component Senior Leadership provided assurance statements to the SAT that serve as the

primary basis for the Secretary’s assurance statements. These assurance statements are also

based on information gathered from various sources including management-initiated internal

control assessments, program reviews, and evaluations. In addition, these statements

consider the results of reviews, audits, inspections, and investigations performed by the

Department’s Office of Inspector General (OIG) and GAO.

Department of Homeland Security Financial Accountability Act

Pursuant to the DHS FAA, the Department must obtain an opinion over internal control over

financial reporting. Using GAO Standards for Internal Control and Circular A-123 as criteria, the

Department has demonstrated continued progress in reducing its financial material

weaknesses and maintaining progress over sustained processes through routine internal

control testing. This robust find, fix, test and assert assessment strategy will support

sustainment of the financial statement opinion and achievement of an opinion over internal

control over financial reporting in the near future.

In FY 2017, the Department reduced the severity of property, plant and equipment to a

significant deficiency due to hard work and demonstrated progress evidenced through the

USCG and NPPD remediation and sustained efforts by the remaining components. This

reduces the Department’s number of material weaknesses from three to two, where

1) financial reporting and 2) IT Controls and System Functionality material weaknesses will

remain. The Department remains dedicated to fully remediating financial reporting and IT

system security and functionality weaknesses. A summary of corrective actions are provided in

the tables below.



Table 1: Internal Control over Financial Reporting Corrective Actions

Material

Weakness

Component Year Identified Target Correction Date

USCG, NPPD, FEMA, USSS,

and CBP FY 2003 FY 2018

Financial

Reporting

USCG, NPPD, FEMA, USSS, and CBP experienced challenges with deficiencies in multiple

financial management areas. These issues may include a combination of budgetary

accounting, trading partner reconciliations, journal entries, third party service monitoring,

and lack of compensating controls to mitigate system limitations.

Corrective Actions

The DHS CFO will continue to support Components in implementing corrective actions to

establish effective financial reporting control activities based on component contribution

to the weakness area and risk. One of the primary financial reporting condition is due to a

lack of integrated financial systems at the USCG. The Department and USCG will continue

to focus on implementing and executing interim manual compensating measures, while

pursuing system enhancements. In addition, the Department will continue to prioritize

remediation efforts based on risk and components will implement targeted corrective

actions to resolve the overall Department financial reporting conditions.

Material

Weakness

Component Year Identified Target Correction Date

All DHS Components FY 2003 FY 2019

IT Controls and

System

Functionality

The Department internal control assessment identified IT Controls and System

Functionality as a material weakness due to inherited control deficiencies surrounding

general computer and application controls. The Federal Information Security

Management Act (FISMA) mandates that federal agencies maintain IT security programs in

accordance with OMB and National Institute of Standards and Technology guidance. In

addition, the Department’s financial systems do not fully comply with the FFMIA.

Corrective Actions

The DHS CFO and CIO will support the Components in the design and implementation of

internal controls in accordance with DHS 4300A, Sensitive Systems Handbook,

Attachment R: Compliance Framework for CFO Designated Financial Systems.

Remediation efforts will occur across the Department with a risk-based approach to

correcting root-cause weaknesses across all CFO designated systems.

Federal Financial Management Improvement Act (FFMIA)

FFMIA requires federal agencies to implement and maintain financial management systems

that substantially comply with federal financial management systems requirements, applicable

federal accounting standards, and the United States Standard General Ledger at the

transaction level. A financial management system includes an agency’s overall financial

operation, reflecting the people, processes, and technology to capture, classify, summarize,

and report data in a meaningful manner to support business decisions.

We assess our financial management systems annually for compliance with the requirements

of Appendices A and D to OMB Circular A-123 and other federal financial system requirements.

In addition, we assess available information from audit reports and other relevant and

appropriate sources, such as FISMA compliance activities, to determine whether our financial

management systems substantially comply with FFMIA. We also assess improvements and

ongoing efforts to strengthen financial management systems and the impact of instances of

noncompliance on overall financial management system performance.

Based on the results of our overall assessment, the material weakness related to Information

Technology Controls and Systems Functionality affects the Department's ability to fully comply

with financial management system requirements, and therefore the Department is also

reporting a noncompliance with FFMIA. The Department is actively engaged to correct the

material weakness through significant compensating controls while undergoing system

improvement efforts. The outcome of system improvement efforts will efficiently enable the



Department to comply with government-wide requirements and reduce manual compensating

controls.

Table 2: FFMIA Non-compliance Corrective Actions

Non-Compliance Component Year Identified Target Correction Date

All DHS Components FY 2003 FY 2019

FFMIA Non-

compliance

DHS does not substantially comply with FFMIA primarily due to lack of compliance with

financial system requirements as disclosed as material weakness in IT Controls and

System functionality. USCG, CBP, and ICE noted that certain key systems are unable to

produce transaction level activity that reconciles at the USSGL-level. USCG also reported

a lack of compliance as its financial and mixed systems do not allow for financial

statements and budgets to be prepared, executed, and reported fully in accordance with

the requirements prescribed by the OMB, Treasury, and the Federal Accounting

Standards Advisory Board.

Corrective Actions

The DHS CFO, CIO, and Components will support the Components in the design and

implementation of internal controls in accordance with DHS 4300A, Sensitive Systems

Handbook, Attachment R: Compliance Framework for CFO Designated Financial Systems.

In addition, DHS CFO and Components will continue to design, document, and implement

compensating controls to reduce the severity of system security internal controls and

functionality limitations.

Digital Accountability and Transparency Act of 2014

In addition to performing an analysis of the Department’s compliance with FMFIA, FFMIA, DHS

FAA, and applicable laws and regulations, management also considered its compliance with

recently enacted laws. On May 9, 2014, the President signed the Digital Accountability and

Transparency Act of 2014 (DATA Act) into law. By May of 2017 the law required the DHS to

comply with the requirements outlined in the Act in accordance with guidance received from

the Treasury and OMB. DHS will be required to report obligations by appropriation, program,

object class, and award. This effort required enterprise-wide coordination and collaboration to

modify business processes and systems to ensure full compliance. In FY 2016 the Department

developed the initial technical solution and conducted two pilots successfully demonstrating

the ability to link financial and award data. In August 2016, DHS submitted the DHS

Implementation Plan Update to OMB as required. In April 2017, DHS successfully certified and

submitted its first quarterly spending data for posting on USASpending.gov. In FY 2017, DHS

continued to produce, test, and validate data improving the quality to ensure timely and

accurate data reporting to meet and comply with the DATA Act requirements.

Federal Information Security Modernization Act of 2014 (FISMA)

FISMA provides a framework for ensuring effectiveness of security controls over information

resources that support federal operations and assets, and provides a statutory definition for

information security.

The Office of Inspector General (OIG) conducts an annual assessment of the DHS information

security program in accordance with FISMA to determine whether DHS’s information security

program is adequate, effective, and complies with FISMA requirements. Per the FY 2016 OIG

FISMA audit report, “Evaluation of DHS’ Information Security Program for Fiscal Year 2016,”

the OIG identified four recommendations for the Department to improve Federal information

security. As a result of corrective actions taken prior to June 2017, the OIG has closed three of

the recommendations from the FY 2016 FISMA audit. The final OIG recommendation has been

noted as resolved but will remain open pending receipt of DHS provided evidence.



The FY 2017 OIG FISMA audit is pending completion at the time of this report’s issuance. As

such, the audit recommendations and Management’s response to the recommendations will

be provided when made available.

Financial Management Systems

Pursuant to the Chief Financial Officers Act of 1990, the DHS CFO is responsible for developing

and maintaining agency accounting and financial management systems to ensure systems

comply with applicable accounting principles, standards, and requirements and with internal

control standards. As such, the DHS CFO oversees and coordinates all financial system

modernization efforts.

DHS has established a Joint Program Management Office (JPMO) to oversee Financial Systems

Modernization (FSM) program management, priorities, risk, and cost and schedule. Our

approach to modernizing financial management systems across the Department, includes:

Expanding business intelligence and standardizing data across Components to quickly

provide enterprise-level reporting;

Targeting investments in financial systems modernization in a cost-effective manner

and minimizing duplication in infrastructure in accordance with emerging technologies

and guidance;

Prioritizing essential system modernizations for the Components with the most critical

need and projected greatest potential return on investment for efficiency and business

process improvements; and

Strengthening existing system controls—DHS is not depending on FSM efforts to achieve

a “clean” internal control opinion or FFMIA compliance. We are addressing IT control

weaknesses in high impact CFO designated systems through a holistic, multi-year

remediation and internal control strategy, including compensating and complimentary

controls.

As a federal shared service provider, the Department of the Interior (DOI), Interior Business

Center (IBC) implemented financial management system solution for DNDO at the IBC data

center in FY 2016 and additional development was continuing to eventually migrate TSA and

USCG onto the new solution when fully developed to meet their requirements. In March 2017,

it was determined that DHS would transition the DNDO, TSA, and USCG FSM initiatives out of

the DOI IBC. DHS has made a significant investment in the current financial management

solution and is migrating this solution to an alternative hosting environment to complete

integration and implementation. This system solution delivers a standardized baseline for

DNDO, TSA, and USCG, with increased functionality and integration for DNDO. DHS is

leveraging the lessons learned from this shared services implementation, reducing risk in

future migrations through deliberative approaches to resource management, business process

re-engineering, risk management, change management, and scheduling rigor and oversight.

In addition, USSS is on track to move to the next version of their current accounting software,

Oracle Federal Financials, expected to be complete in FY 2018. Other FSM efforts are in the

early stages, including FEMA’s financial system, flood insurance, and grants management

modernization.



Performance Accountability

Based on our internal controls evaluations, the performance information reported for the

Department in our performance and accountability reports are complete and reliable, except

those noted in our Annual Performance Report. The Department’s performance and

accountability reports for this and previous years are available on our public

website: http://www.dhs.gov/performance-accountability.


Certificate of Excellence in - Homeland Security · 2017-11-15 · Certificate of Excellence in...

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